3rd Quarter 2016
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“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Statements contained in this presentation which are not historical facts and which pertain to future operating results of Prosperity Bancshares®, Inc. and its subsidiaries constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the company’s periodic reports and filings with the SEC. Copies of the SEC filings for Prosperity Bancshares® may be downloaded from the Internet at no charge from www.prosperitybankusa.com.
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3Q16 Highlights •
Net Income of $68.651 million and earnings per share (diluted) of $0.99 for three months ending September 30, 2016
•
Assets of $21.404 billion, loans of $9.548 billion, and deposits of $16.921 billion at September 30, 2016
•
Common equity tier 1 ratio was 14.41% and leverage ratio was 8.50% at September 30, 2016
•
Sound asset quality with annualized net charge offs/average loans of 0.01% for the third quarter 2016
•
Non-performing assets to average earning assets remain low at 0.32% or $60.166 million for the third quarter 2016
•
Declared cash dividend of $0.30 per share for the third quarter 2016; increased dividend to $0.34 per share for the fourth quarter 2016 4
Corporate Profile •
A Texas based financial holding company with approximately $21.404 billion in assets, and the 2nd largest Texas-based commercial bank
• •
Shareholder driven with 4.9% fully diluted insider ownership Successful integration of 42 acquisitions (includes branch and failed bank transactions) 245 Full Service Locations
16 29 36 22 65 29 34 6 8
in Bryan/College Station Area in Central Texas Area in Dallas/Fort Worth Area in East Texas Area in Houston Area in South Texas Area in West Texas Area in Central Oklahoma Area in Tulsa Area 5
Balance Sheet Summary $22,500
Totals as of 09/30/2016
$4,000
$21,000
Loans = Deposits = Assets =
$3,500
$19,500
$9.548 Billion $16.921 Billion $21.404 Billion
$18,000 $16,500 $15,000 $13,500
10 year CAGR
$3,000
Loans = Deposits = Assets =
$2,500
$12,000
19.9% 19.7% 19.9%
Loans Deposits Assets Equity
$10,500 $9,000
$2,000 $1,500
$7,500 $6,000
$1,000
$4,500 $3,000
$500
$1,500 $0
$0 2005 $ in millions
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3Q15 3Q16 6
Net Income $350 Net Income
$300
$297.4 $286.6
Net Income (excluding Purchase Accounting Adjustments (PAA))
$255.5
10 Year CAGR 19.6%
$250
5 Year CAGR 17.6%
(excluding PAA 18.2%)
$236.2 $221.4
(excluding PAA 14.9%)
$200
$185.7 $167.9 $154.9 $141.7
$150
$127.7 $111.9
$100
$84.2
$84.5 $70.6 $68.7 $64.2 $63.9
$61.7
$50
$47.9
$0 2005
$ in millions
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3Q15
3Q16 7
EPS Growth Diluted $5.00
EPS EPS (excluding Purchase Accounting Adjustments (PAA))
$4.32 $4.09
$4.00
10 Year CAGR 8.7%
(excluding PAA 7.5%)
5 Year CAGR 8.4%
(excluding PAA 6.0%)
$3.65 $3.43
$3.23 $3.01
$3.00
$2.98
$3.65
$3.07
$2.73 $2.41
$2.00
$1.77
$1.94
$1.94
$1.86
$1.01 $0.92
$1.00
$0.99
$0.92
$0.00 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3Q15
3Q16
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Net Interest Margin 4.50% Net Interest Margin (Tax Equivalent)
4.25%
Net Interest Margin (excluding Purchase Accounting Adjustments)
4.00%
3.83% 3.85%
3.82%
3.75% 3.50%
3.62%
3.64% 3.64%
3.89%
3.59%
3.55% 3.52% 3.53%
3.57% 3.48%
3.42% 3.43%
3.39%
3.52%
3.37% 3.29%
3.30% 3.24%
3.25%
3.36%
3.35% 3.33% 3.31% 3.19%
3.18%
3.00%
3.08% 3.09%
3.26% 3.25% 3.17%
3.13% 3.10% 3.11%
3.21% 3.19%
3.14%
2.75% 2.50%
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Return on Average Tangible Common Equity 40.00% 35.00% 31.53% 30.03%
29.88%
28.66%
30.00%
27.40% 25.11%
24.24%
25.00%
22.52% 24.16% 19.30%
21.93%
20.00%
19.98% 16.79%
15.00% 10.00% 5.00% 2005
Interim periods annualized.
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3Q15 3Q16 10
Return on Average Assets 2.00%
1.75%
1.50%
1.47%
1.42% 1.44%
1.38%
1.38%
1.44% 1.35%
1.36% 1.33%
1.26% 1.20%
1.25%
1.30% 1.27%
1.00%
0.75% 2005
2006
Interim periods annualized.
2007
2008
2009
2010
2011
2012
2013
2014
2015
3Q15 3Q16 11
Loan Growth Loans
$10,000 $9,000
$9,244
65.4%
$9,439
$9,548
70.0%
$9,205
Loans/Deposits
65.0%
$7,775
$8,000
59.1%
60.0%
$7,000 $6,000
52.8% $5,180
48.8%
$5,000
50.8%
52.2%
56.4% 55.0%
53.4% 54.3%
50.0% 46.5% 46.7% 46.7%
$4,000
$3,567 $3,093
$3,377
$3,485
$3,766
44.5%
45.0%
$3,000 $2,037
$2,000
40.0%
$1,542
$1,000
35.0%
$0
30.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 3Q15 3Q16
$ in millions
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Loan Portfolio September 30, 2016 Loans/Deposits: 56.4%
Agriculture 7.0% Consumer 2.8%
Loans By Area Approximate $ in millions
Home Equity 2.9%
Bryan/College Station: $569 Central Oklahoma: Commercial R.E. 33.1%
1-4 Family Residential 25.5%
Central Texas:
$1,251
Dallas/Ft. Worth:
$1,010
East Texas:
Construction 12.6%
Energy 3.2%
Commercial 12.9%
Amount % of total Commercial & Industrial $ 1,233 12.9% Construction, Land Dev 1,206 12.6 1-4 Family Residential 2,427 25.5 Home Equity 280 2.9 Commercial R.E. 3,159 33.1 664 7.0 Agriculture (includes farmland) Consumer & Other 270 2.8 Energy 309 3.2 Gross Loans $ 9,548 100.0%
$499
$332
Houston:
$3,108
South Texas:
$1,252
Tulsa Oklahoma:
$685
West Texas:
$842
Approximate $ in millions
Construction Loan Breakout Approximate $ in millions Single Family:
$390
Land Development:
$78
Raw Land:
$171
Residential Lots:
$132
Commercial/Other:
$438
Purchase Accounting Discount: ($3)
CRE Loan Breakout Approximate $ in millions Owner Occupied:
$1,460
Shopping Center:
$434
Office Building:
$341
Multi-family:
$182
Other:
$742
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Energy Portfolio As of September 30, 2016
Outstanding Balance
Portfolio Commentary Total outstanding balance of $309 million, or 3.2% of total loans Total unfunded commitments of $154.2 million
Servicers Producers $169.0 $140.0 55% 45%
Total energy reserves of 2.93% or $9.0 million $26.2 million of energy loans are subject to a fair value mark of $5.9 million
Unfunded Commitments
Four energy loans are Shared National Credits (SNCs) with an outstanding balance of $5.6 million Average relationship size for both producers and servicers is under $1.0 million, with only six relationships over $10.0 million
Servicers $83.7 54%
Producers $70.5 46%
Reserve-based lending is only on proven producing reserves Servicing portfolio is well-diversified
$ in millions
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Houston MSA CRE Portfolio As of September 30, 2016
TOTAL: $1.080B Shopping Center/Retail 18.7% Owner Occupied 47.1%
Shopping Center/Retail - $202.4 Commercial & Industrial 8.4%
Commercial & Industrial - $91.1 Office - $78.8 Medical - $52.4 Multi-Family - $47.8
Office 7.3% Medical 4.9%
Other 6.5%
$ in millions
Hotel 2.7%
Hotel - $29.3 Other - $70.1 Owner Occupied - $508.5
Multi-Family 4.4%
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Asset Quality NPA*/Loans + OREO
5.00% 4.50%
Prosperity Bank UBPR - Peer Group
4.88%
4.65% 3.95%
4.00% 3.50% 3.00%
2.82%
2.63%
2.50%
1.91%
2.00%
1.35%
1.50% 1.00%
1.04%
1.07% 0.61% 0.57%
0.50%
0.49%
0.40%
0.48%
0.45%
0.32%
0.25%
0.29%
0.40%
0.46%
0.53%
0.63%
0.09% 0.05%
0.00% 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3Q15
3Q16
*Includes loans past due 90 days and still accruing Source: UBPR = Uniform Bank Performance Report; Peer Group 11 (231 Banks) – insured commercial bank having assets greater than $3 billion
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Deposit Composition September 30, 2016 Cost of Deposits: 0.22%
Certificates & Other Time Deposits 14.6%
DDA - NonInterest Bearing 30.5%
Money Market & Savings 32.8%
Amount DDA - Non-Interest Bearing $ 5,159 DDA - Interest Bearing 3,749 Money Market & Savings 5,543 Certificates & Other Time Deposits 2,470 TOTAL DEPOSITS $ Energy 16,921
DDA - Interest Bearing 22.1%
$ in millions
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Dividend History (c)
$1.25
(b)
$1.24
$1.12
Dividend Payment (a)
$1.05
$0.99 $0.89 $0.80
$0.85 $0.72 $0.64 $0.65
$0.57 $0.51 $0.41
$0.45 $0.31
$0.46
$0.35
Compounded Annual Growth Rate from 2003-2016 was 13.15%
$0.25 $0.25
$0.05 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
-$0.15
(a) 2014 dividend consists of $0.24 per share declared in 1Q 2014, 2Q 2014, 3Q 2014 and $0.2725 per share declared in 4Q 2014 (b) 2015 dividend consists of $0.2725 per share declared in 1Q 2015, 2Q 2015, 3Q 2015 and $0.30 per share declared in 4Q 2015 (c) 2016 dividend consists of $0.30 per share declared in 1Q 2016, 2Q 2016, 3Q 2016 and $0.34 per share declared in 4Q 2016
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Total Return Performance IPO (November 12, 1998) to September 30, 2016
1,400
1,200
$100,000 invested in Prosperity’s IPO on 11/12/98 was worth $1,187,653 on 9/30/16
1,000
800
600
400
200
0 11/12/1998
11/12/2001
11/12/2004
PB (+1,087.7%)
11/12/2007 S&P 500 (+171.9%)
11/12/2010
11/12/2013
9/30/2016
NASDAQ BANK (+67.2%)
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Corporate Relocations to Texas California AccentCare Active Networks The Allen Group, Inc. Allied Electronic Recycling ALL-Q-TELL Corp. Ameriflight LLC Banker’s Toolbox, Inc. Boreland Software Corporation Caliber Collision Centers Calpine CCRA Travel Solutions Channell Commercial Corp. CompassLearning Consolidated Electrical Distributors Copart (CPRT) Daegis, Inc. (DAEG) DBG Dimensional Fund Advisors DMX MUSIC, Inc. DynaPump, Inc. EDM Labortories Epicore Software Corporation Farmer Brothers (FARM) Firefly Space Systems Fluor Corporation (FLR) Freebirds World Burrito Fonality Glenmount Global Solutions HID Global Ironclad Performance Wear Corp. Jacobs Engineering Jamba Juice Company Kubota Liberty Fitness Holdings, LLC loanDepot, LLC Marco Fine Arts MC Endeavors, Inc. (MSMY) MDB Capital Mitratech Monkey Sports Inc. MVTransportation Occidental Ptetroleum (OXY) OmniTracs Pacific Union Financial Pain Therapeutics (PTIE) Primoris Services Corporation (PRIM) R2Sonic Red Mango, Inc. Revionics, Inc. Rifle Gear Sanyo Energy Sionix Corp. (SINX) Solera Holdings (SLH) Superconductor Technologies (SCON) Telmar Network Technology, Inc. Tenet Healthcare (THC) Thermasol Toyota USA (TM) Trend Micro (TYO.4704) Vendor Resource Management Vermillion, Inc. (VRML) Visual Numerics W3global Waste Connections, Inc. (WCN) Websense Xeris Pharmaceuticals
Corporate Relocations to Texas (2004 – Present) Canada Absolute Software (ABT) Bio-Solutions Corp (BISU) Direct Energy Mitel Corp (MITL) QI Systems Inc. MoneyGram (MGI) Speed Commerce
Washington LifeLast, Inc. National Scooter Co. Prometheous Energy Company
Minnesota American Environmental Energy, Inc. (AEEI) EmpowerMX LecTec Corp. Enerlex Resources, Inc. Ottobock Healthcare MoneyGram (MGI) Speed Commerce
New York American Locker Group Inc. (ALGI) DataTreasury Corp Fiesta Restaurant Group (FRGI) Greatbatch (GB) HMS Holdings (HMSY) Six Flags Entertainment (SIX) Massachusetts Cimage Novasoft Signature Systems Group Circor Energy (CIR) Visionworks of America Invensys Process Systems Michigan Liberty Mutual Comerica (CMA) NTT Data Inc. (TYO.9613) Cambium Learning (ABCD) VCE Corp.
Montana ViZn
Nevada CoreSpace
Colorado Cagney Global Logistics Global Clean Energy, Inc. (GCEI) Heartland Oil & Gas Corp. Magpul Industries Par Petroleum Corporation (PARR) Quovadx Sun River Energy, Inc. (SNRV)
Nebraska Heartland Automotive Services
Kansas Alco Stores (ALCS) Layne Christensen Co.(LAYN) Lulu’s Dessert Corp Enerlex Resources, Inc.
Arizona Quest Resource Holdings Corp. (QRHC)
Oklahoma Casedhole Solutions , Inc. CITGO Petroleum Corp Global Power Equipment Group Hilti North America LinkAmerica NATCO Group, Inc. Petrohwk Energy Corp Ring Energy, Inc. (REI) Soalr Winds (SWI) Trinity Hospice Inc.
Illinois BL Restaurant Group Ferris Manufacturing MedMark Services, Inc. Monolith Technology Hldgs, LLC Neovia Logistics RMG Networks (RMGN) State Farm SolarBridge Technologies, Inc. Top Golf
Pennsylvania Big Brothers Big Sisters Linn Energy, LLC (LINE) MPOWER Mobile Union Drilling, Inc.
New Jersey Ameriflex CVE Technology Comparex USA
Connecticut Accudyne Industries iCall Inc. TradeCapture Inc.
Maryland Broadwing Corp. Ohio Covington Group, Inc. Hanger Inc. (HGR) Robbins & Myers CyrusOne (CONE)
Missouri Kupper Parker Comm. PotentiaMetrics Tennessee Elite Data Services, Inc. (DEAC) Miller Energy Resources, Inc. Forward Air Corp. (FWRD)
Washington D.C. EF Johnson Technologies, Inc.
North Carolina Dex Media (DXM)
Arkansas Golden Living US Rare Earths Inc. (UREE)
Louisiana Bristow Group, Inc. (BRS) EPL Oil & Gas, Inc. NGC Transmission
Georgia Cyntech Technologies (CYNT) NYLO Hotels Alabama Torchmark Corporation (TMK) Zoes Kitchen (ZOES) Florida CCS Medical DreamVision iWorld Projects & Systems, Inc. (IWPS) Puget Technologies, Inc. (PUGE) SoftServe
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The Houston Market: Overview Population Growth From January 2015 to January 2016 Houston added more people last year than any other MSA 250.0
Population Growth (000s)
209.6 200.0
173.7
150.0
135.4 104.8106.2106.7
100.0
50.0
0.0
78.3 78.9
90.1
143.1
Growth Drivers In the 12 months ending August 2016, Houston created 14,200 jobs Mining and logging (oil and gas extraction and oil field services) gained 1,200 jobs in August of 2016 The Houston Airport System handled 36.7 million passengers through the first eight months of 2016 − International passengers totaled 8.1 million, up 10.4% from the same period in 2015 Single family home sales rose 8.2% from 7,314 in August of 2015 to 7,914 in August of 2016 The Houston Purchasing Managers Index (PMI), a short-term leading indicator for regional production, registered 46.1 in August, up from 43.8 in July
Economic Diversity With 2.2 million residents, Houston is the fourth most populous city in the U.S., trailing only New York, Los Angeles and Chicago Houston is home to 26 Fortune 500 companies, half of the total Fortune 500 companies in Texas (which ranks 2nd nationally)
Source: Bureau of Labor Statistics as of February 2016, PHA Accounting, PHA Market Development, United States Census Bureau, Greater Houston Partnership and Fact Set.
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The Houston Market: Economic Diversity Houston maintains a diverse and productive economy despite recent turbulence in the oil and gas industry The Perryman Group forecasts sustained growth for the Houston metro over the next quarter century August 2016 Employment by Industry
Forecasted Houston MSA Gross Area Product ($bn) $1,200.0
Government 12%
Education and health services 13%
Leisure and hospitality 11%
$1,123.4 $993.1
$1,000.0 $861.0 $800.0
Professional and business services 15%
Manufacturing 8%
Construction 7%
$731.5 $608.6
$600.0 $492.7 $400.0
$200.0
Trade, transportation, and utilities 21%
Information 1%
Source: Bureau of Labor Statistics.
Financial activities 5% Other services 4% Mining and logging 3%
$0.0 '15
'20
'25
Source: The Perryman Group as of June 2016.
'30
'35
'40
22
Contact Information
Corporate Headquarters
Investor Contacts
Prosperity Bank Plaza
David Zalman
4295 San Felipe
Chairman & Chief Executive Officer
Houston, Texas 77027
979.543.2200
[email protected]
281.269.7199 Telephone
David Hollaway
281.269-7222 Fax
Chief Financial Officer
www.prosperitybankusa.com
281.269.7199
[email protected]
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